Tomb Finance Post Mortem
Tomb team here.
These, for us, have been 48 of the most intense hours of our lives.
We are in the DeFi space, and we know the risks, but it still hurts.
First thing first: be cautious. We, as a team, can’t suggest buying, selling, or holding. Our ethics and morals go first to the safety of our users, but in this case, we really can’t say what to do.
PLEASE, if you invested money that you need to live, pay rent, bills, dinner, withdraw them instantly. Not tomorrow.
So, let’s have a brief recap of what happened.
The tomb project had a tax applied to the token when it was sold. We called it the Gatekeeper, as it allowed us to control whales and maintain the peg.
In the early stages of development, Tomb contracted the auditing firm Obelisk to audit its contracts fully. Obelisk identified a potential workaround to the gatekeeper tax and alerted the Tomb team to its risk. The Gatekeeper Tax had always existed as a temporary safeguard during the early stages of the protocol and was slated to be removed via governance voting soon. When the Tomb team was alerted to this workaround, the team had two options:
- Migrate to new contracts, which we viewed as potentially catastrophic to the continued success of the project.
- Immediately remove the Gatekeeper Tax, which would have caused a sudden bank run similar to what we just experienced.
With a long-term horizon for the future of our community and project, both of these options guaranteed immediate failure for the project. As a result, the team decided to release its use cases more quickly to increase revenue to the DAO and further accelerate the gatekeeper’s removal. We believed that these use cases would further assist the DAO in re-pegging and serving as a shield against bad actors. At the project’s trajectory before this attack, we hoped that in a matter of 2–4 weeks, we would be able to remove the gatekeeper altogether safely. The bank run happening on the removal of the Gatekeeper during the “attack” seems to show how our fears were correct.
The Use Cases planned to be released include a Wrapped Tomb (WTOMB) to allow single staking on other platforms, New Vaults that would give xTomb and xTshare receipts to users, xTomb as collateral on Scream, single staking xTshare to earn BOO, Robovaults to combine the Cemetery LPs as a way for BTC and ETH holders to profit from the Cemetery while helping the peg, a brand new use case within the FTM ecosystem with fees used to buyback and burn Tomb, and a huge NFT drop from a celebrity in collaboration with Tomb Finance.
On 3 September 2021, a bad actor spammed all across the Fantom discords a website that allowed people to sell Tomb, paying a lower fee than the Gatekeeper, along with an untruthful message about an apparent “soft rug” and all sorts of accusations about the team.
Technically for the project, this part was irrelevant. We were floating close to peg for months, and we were already planning to remove the tax once we delivered our use cases in the next 2 weeks.
Unfortunately, the FUD, the cries of “exploit,” and general mania during this hour of our chats being spammed with the exploiter website/message was too much, and a bank run ensued.
42 transactions had already been registered with the website created by a bad actor. We didn’t want our users to use a dangerous website, so we disabled the Gatekeeper, allowing everyone to sell without paying the tax through the normal, safe route.
The FUD brought Tomb down to 0.2–0.3 FTM, although it has since bounced back to 0.3–0.45 FTM…
We all know this part.
Our leaders, the Core Team, after an exhausting night, took a 2 hours break. We asked them because the Discord chat was going crazy, and we needed them with emotional freedom and a clear head.
After this, it was time for discussions. We chatted and talked with the Reaper.farm and Spookyswap team on what’s next.
Before saying anything else, I want to highlight that this is not easy. No answer will please everyone.
We would like to add that investing in Tomb Finance cannot be advised for or against by the team. It’s not that we don’t believe in the power of the community we have and its dedication to rebuilding. Instead, we believe the risk is high that the same bad actors who incited this bank run have accumulated most of the protocol’s supply at low prices. Moving forward with the same token contract could potentially expose the team and the community to an even larger bank run in the future as the protocol would no longer be controlled by good actors. In other words, we don’t know if the peg is recoverable, and we are concerned about the fallout even if it was.
For the time being, the core team will be giving most of the community management to the moderators. At the same time, we retreat to focus entirely on working on something new that may continue to benefit Tomb users in particular (See Point 2 below).
We will not stop you if the community can recover peg with the new release and positive market sentiment.
The best course of action we have come up with is multi-tiered and carefully thought out once the dust settled.
- We will release the first thing in the Roadmap when the bank run started, Tomb Vaults. The workings of the vaults will be covered in a separate Medium article in the next couple of days. What is to be noted now is that the 4.5% fee on profits from the vaults will go to the Tomb DAO fund, with no team allocation or anything else. So will the 0.1% withdrawal fee.
- The Development team will begin working on a new project with more information to be released in the next 3 weeks. As it stands, we intend to move away from a seigniorage model stablecoin. We will explore how this can be favorable to Tomb users and benefit from this new project. The biggest release we had for September will most likely be migrated to the new project. We are exploring how any revenue from this can also benefit those mentioned above.
Again, to all our users, our community and its people are our biggest concern right now. We love what everyone built around us. As developers, it is beautiful being around such a kind community that often lifted each other, donated to charity, and banded together for the common good in too many ways to count. Personally, the Tomb Discord is the best online crypto community I have been involved in since I started Defi.
We know people are hungry for an update. We hope this article will address what happened, how we feel about our community, and what is coming for the team and everyone to make the best decision for themselves.
Life doesn’t get easier or more forgiving. We get stronger and more resilient.